USD/CAD - Loonie Soft Ahead of Bank Rate Decision

The federal government will unveil a budget update that is expected to cut in half initial forecasts of a $28-billion deficit; this is mainly due to a Canadian economy that has been extremely strong. It seems timely that the announcement comes before the Bank of Canada’s Monetary Policy Report and interest rate announcement tomorrow. The BoC, which has said it is economic-data-dependent, is widely expected to hold interest rates at 1%. In a press conference held at 11:15 am tomorrow, investors will listen for any hints from BoC Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins of future tightening.

U.S. Manufacturing Purchasing Managers' Index was released this morning and expectations were for 53, which is in line with the previous release. Fundamentals are light today with the most prominent event risk for the U.S. dollar in the next 24 hours being Durable Goods Orders, which is forecast for 0.9% from previous of 0.2%, releasing at 8:30 a.m. tomorrow. Geopolitical tensions are expected to ramp up, as Japan, South Korea, and the United States launch two days of drills in the Korean Peninsula. The exercises are meant to practice cross-navy capabilities in tracking and destroying missile threats. The dollar index remains at the top of its two-month range at 93.90.

Experts expect a range today of $1.2595 to $1.2691

PMI data is the theme today in Europe with results being mixed. France’s Manufacturing, Services, and Composite PMI all exceeded expectations, while Germany’s Services PMI was the only data that fell below expectations. On the other hand, euro-zone manufacturing PMI was the single metric that released better than expected. The European Central Bank will take the stage on Thursday when it will release its rate decision and its tapering decision for next year. The euro is currently trading at $1.4875.

Commentators expect a range today of $1.48020 to $1.4900

There is no significant event risk today out of the U.K., but Prime Minister Theresa May did mention yesterday that the U.K. will go solo on trade if no Brexit deal is reached by next summer. U.K. GDP is due to release tomorrow and is expected to rise 0.3% q/q and 1.5% y/y. The pound is currently trading at $1.6654.

Traders expect a range today of $1.6598 to $1.6712

The Australian dollar is tracking lower today along with its New Zealand counterpart. The kiwi dollar fell sharply after comments from Prime Minister designate Jacinda Ardern called for a review and reforms on the Reserve Bank Act. Focus now shifts to Australian Consumer Price Index data due tonight at 8:30 pm EDT.

Oil (WTI): $52.36 U.S. per barrel

Gold: $1,276.48 U.S. per ounce

Silver: $16.97 U.S. per ounce

Copper: $3.2025 U.S. per tonne

Dollar Index: 93.90